IOU

Your tax refund check fom the state of CA for 2008 might be an IOU in lieu of a check. [MSNBC]

Will banks accept it? Unknown, though they did in 1992.

Meanwhile, here is an eye-popping article [LATimes] which exposes the financial legerdemain cities in CA have practiced in order to finance themselves into looming bankruptcy.

Gotta love them FI-NAN-SHALL geniuseseses.

Hmmm, I guess if I paid the state my taxes owed with my personal IOU they’d understand, eh?

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Robert Rubin is a part owner of the highend fly fishing shop Urban Angler (stores in NYC and DC), in which Andy and Mark Madoff are also investors.

Why is the Fed. Res., Inc. purchasing $500B of agency debt thru June?

Because nobody else wants it.

Holdings by foreign central banks, over the last one year, were a net decrease. A net sell-off.

Meanwhile, Treasuries spike, as this is the preferred ’safe haven.’

So in case you were wondering ‘who funded the housing bubble?’ there is the answer.

Chart above plainly tells the story: red line tracks foreign purchases of agency (FNM and FRE) debt (notice how it ends below zero); yellow line reflects the humongous recent increase in the purchase of Treasuries. To the moon Alice! TO THE MOON!

Housing Doom picks up Brad Setser’s article and runs with it.

Score!

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It is neither “Federal” nor “Reserve.”

DOW 3800!

Obama backpedals on promise (first in a series)

We just got through eight years of absolutely the worst president the people of this country should ever have to suffer… Yet we survived… So far… then we wipe a brow and and let out an audible WHEW! only to realize, no, NOT AGAIN, how much longer must we suffer the slings and arrows of outrageous fortune?

Is Barry Hussein nothing more than a serving of Bush II’s  sloppy seconds?

Yeah difficult to fathom, I know. But at the end of the day…. it’s night, and a politician is a politician… especially one from <ahem> Chicago.

I bet the true believers(tm) never saw that one coming, eh?

Scrooged by the Democrats: Will the Rich Ever Pay Their Fair Share? [Mother Jones]

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Historically, public employees accepted lower salaries in exchange for attractive retirement pensions and cushy jobs handed to them by relatives and/or political friends. Now their salaries have become competitive with private sector employees, most of whom have been stripped of their pensions. [wallstreetexaminer]

Where are the indictments?

Banking officials and investors like Madoff are being treated like victims, not the common variety of gutter snipe they really and truly are. What gives?

If you or I held up a liquor store at point of index finger we’d likely receive not just a stiff sentence, but the possibility of death by cop.

You don’t suppose this dearth of prosecutions has this anything to do with Bush appointments of know-nothing and do-nothing insider cronies into positions as federal prosecutors does it?

Maybe just a little?

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“Greenspank, Bukkake, and now Bernie Madoff- a few jews who have done more harm to the reputation of the Jewish people than Hitler.”

Eventuality

At some point, the U.S., states and local government will be forced to default on all their financial obligations such as interest on bonds, pensions, medical care, etc. This will happen in one of two ways: either insolvency will be announced, i.e. we can no longer pay our obligations, or the dollar will be devalued to 10 cents (or less), thus reducing everyone’s Social Security pension of $1,000 down to $100 (or less). Magically, all debt and interest due gets cut by 90%, too.

[of two minds]

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“Remember, to arrive at the bailout number the Treasury bean-counters just picked ‘a really big number.’ How do you have confidence in anyone like that, who dares to refer to themself as an economist? I refer to them by what they really are: bean-counters, ass-hats, pretenders, criminal co-conspirator. They know as much about economics as a priest really knows about God.”

TPTB defined

“Basically 2/3 of all productive assets and investment income are owned by 1% of the populace. The effect has been for the richest 1 per cent of the population to increase its share of interest extraction, dividends and capital gains from 37 per cent ten years ago to 57 per cent five years ago, and nearly 70 per cent today. Savings remain high, but only the wealthiest 10 per cent are saving – and this money is being lent out to the bottom 90 per cent, so no net saving is occurring.”

[of two minds]

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“Only a nation convinced of its invulnerability could be so deluded as to spend its waning days of wealth arguing about how the borrowed trillions should be divided, as if they were the spoils of conquest rather than the outright theft of our children’s future.” -Charles Hugh Smith

Ecology of starvation

Now we come to the ecology of starvation. In any ecosystem, any fast-reproducing creature can, once freed of predators and disease, eat its way through the entire available food supply. It then starves to death in great numbers, reducing the load on the ecological system to the point the “carrying capacity” of the environment rises from near-zero to a restored balance.

Every creature will exceed its environment’s carrying capacity if given the opportunity, and we as a nation have long exceeded our financial resources. Rather than re-scale our promised benefits and government to our true surplus, we have borrowed money from our children and grandchildrens’ future surpluses to fund our own risk-abatement/benefits. Now like rats proliferating on an island, our promises to ourselves far exceed the carrying capacity of our real economy; we must now tighten our belts for a generation or two, or starve as we consume the last morsels of future productivity.

In a financial sense, we are eating the seeds needed for the next generation and stripping the fiscal ecology of assets, reducing its future carrying capacity.

[of two minds]

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” Only a nation convinced of its invulnerability could be so deluded as to spend its waning days of wealth arguing about how the borrowed trillions should be divided, as if they were the spoils of conquest rather than the outright theft of our children’s future.” -Charles Hugh Smith

New boss, same boss, etc. et al

An empty pant suit is still an empty suit:

There has to be a question about vetting, as in: did or didn’t the administration actually look into Mary (Schapiro)’s past. Mary’s the one that appointed Mark Madoff to the National Adjudicatory Council in 2001, which we have to assume is an oversight on the part of Obama’s camp if for no other reason than it’s so bloody insane it defies all bounds of logic.

[Dealbreaker][Times UK]

A potential xmas present (appreciate the rating, take notice of one of the authors):

The Great Chefs Cook Kosher

Meanwhile, Bernie Madoff cools his heels in his Park Ave holding cell. WTF? What’s next, a Presidential Freedom Medal?

Is it just me, or is every one of Barry Hussein’s cabinet appointments from the same dark pool of incestuous insiders that characterized the Bush W.H. appointments? It’s the same secret and evil cabal who bear the resonsibility for creating this bleedin’ crisis in the first place!

#This is what you want, this is what you get.#

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Speaking of incest
Bernanke Rescue Loans Guided by Raters That Graded Subprime Mortgages AAA [Bloomie]

Dec. 18 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke is basing hundreds of billions in emergency lending on credit ratings from companies that gave AAA grades to toxic securities.

The Fed has purchased $308.5 billion in commercial paper and lent $631.8 billion under eight credit programs, most of which require appraisals of short-term debt and loan collateral by “major nationally recognized statistical ratings organizations.” That, in effect, means Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.

It is foolhardy to rely on the three New York-based companies, said Keith Allman, chief executive officer of Enstruct Corp., which trains investors in financial modeling and asset valuation. The major raters issued top marks to $3.2 trillion in subprime mortgage-backed securities at the root of the financial crisis.

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Fifty points to ponder
About the economy and the nation; a sampling: [owner earnings]

• More people will lose their jobs. Even more people will be underemployed.
• How many employee salaries are being paid for by the Federal Government? I’m referring to financial especially and looks soon to be auto manufacturers as well.
• A lot of companies with a lot of cash on the balance sheet haven’t added to that cash in years. Many business models have become permanently impaired.
• I doubt the Fed has ever thought through how it will undue all these lending facilities.
• It’s comical how many financial gurus spent lots of time doing “something” with an end result of losing the clients money. Yet, these financial gurus still want paid for all the time they spent doing “something.” Genius.
• There can’t be any more interest rate cuts.
• 0% interest rate = significant decline in the dollar vs. the Euro and the Yen

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‘See how you like dem apples’ dept.
Credit Suisse to Use $5 Billion of Illiquid Assets for Bonuses [Bloomie]

Dec. 18 (Bloomberg) — Credit Suisse Group AG’s investment bank has found a new way to reduce the risk of losses from about $5 billion of its most illiquid loans and bonds: using them to pay employees’ year-end bonuses.

This new rewards scheme should be required of each and every bailed-out Wall St. firm with deriviatives on their books when awarding executive compensation. Who was ‘big brass balls’ enough to leverage up and buy ‘financial weapons of mass destruction?

After all, if you quietly and covertly prepare a shit sandwich for general consumption, you should always be prepared to have to be the one to eat it. It’s the only sociable thing to do!

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“Bonuses based on profits that were not real are not bonuses — they are the proceeds from theft, and as crime, should be disgorged.” -Barry Ritholtz

Evil savers